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Trent – Store expansion to drive growth ahead; LFL growth to remain at mid-to-high single digit


Trent Q4FY25 results were better than our as well as street expectation mainly on account of higher-than-expected EBIDTA margins coming at 16% vs. our as well as street expectation of 14-14.5%. EBIDTA grew by 39% yoy to Rs 665 crore and PAT grew by 21% yoy to Rs349 crore (ahead of our as well as street expectation of Rs280-310crore).
As discussed in pre-quarter business update, revenue growth came at 29%yoy to Rs4,106 crore. Like-for-like growth in Q4FY25 moderated to mid-single digit largely affected by high base of last year, stores launched in last two years attaining maturity and cannibalisation in revenues of some of the existing stores due to launch of new store in the close vicinity to make brand more accessible to the customers.
We expect Like-for-like (LFL) growth to remain in the range of mid-to-high single digit in the near term. It might show double digit LFL in some of the quarters driven by higher festive/wedding season sales. Moderation in LFL growth will get offset by improvement in the margins as more and more stores attaining maturity, which will aid profitability per store to improve in the coming years.
New store additions will help in driving revenue growth at 32% CAGR over FY25-27E. We expect the company to add around 230-250 stores p.a (including 200-220 Zudio stores). Zudio’s, value-fashion brand, revenues are expected to grow at 41% CAGR over FY25-27E. EBIDTA margins are expected to reach close to 17% from the current level of 16% over the next two years.
Strong business model with efficient sourcing abilities, leading player in the fast-growing value fashion space and relatively lean balance sheet makes Trent one of the better players amongst the peers. This will continue to keep valuation at premium (65xFY27E EPS/ 35xFY27E EV/EBIDA) compared with other retail players. We maintain our Buy recommendation on the stock with a PT of Rs 6,025.
Disclaimer – I ICICI Securities Ltd. ( I-Sec). Registered office of I-Sec is at ICICI Securities Ltd. - ICICI Venture House, Appasaheb Marathe Marg, Prabhadevi, Mumbai - 400 025, India, Tel No : 022 - 6807 7100. I-Sec is acting as a distributor to solicit bond related products. All disputes with respect to the distribution activity, would not have access to Exchange investor redressal forum or Arbitration mechanism. The contents herein above shall not be considered as an invitation or persuasion to trade or invest. I-Sec and affiliates accept no liabilities for any loss or damage of any kind arising out of any actions taken in reliance thereon. Investments in securities market are subject to market risks, read all the related documents carefully before investing. The contents herein mentioned are solely for informational and educational purpose.
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